Woori Financial Group: Becoming a World-Class Organization Through Onedo
Total Page：16
File Type：pdf, Size：1020Kb
Woori Financial Group: Becoming a World-Class Organization through OneDo Written by Profs. Hun-Joon Park, Dong-il Jung and Bernd Schmitt CASE STUDY SERIES February 21, 2013 Center on Global Brand Leadership 1 About the Center on Global Brand Leadership, Columbia Business School The Center on Global Brand Leadership was founded at Columbia Business School in 1999 and has since become into the leading global forum on brands. The Center’s mission is to turn the research and intellectual capital of academia's foremost thinkers on branding into practical tools and insights for real-world application. The Center has worked with a wide range of sponsor companies and institutions to develop a variety of thought leadership including: conferences, case studies, videos and webinars, and sponsored research. More details at http://gsb.columbia.edu/globalbrands About the Industry-Academic Cooperation Foundation (IACF), Yonsei University In March of 1991, Yonsei University established a new goal to become a world-renowned university leading the world in both student education and state-of-the-art research. For the first time in Korea, Yonsei University founded the Office of Research Affairs to assist faculty members in their research and improve the overall research environment. Yonsei University established the Industry-Academic Cooperation Foundation (IACF) in March of 2004. The IACF is composed of three departments. The research support department is in charge of research contracting and research funding distribution. The research promotion department is in charge of research development policy, research information management, accounting and human resources. The industry- academic cooperation department is in charge of industry-academic cooperation, intellectual properties and technology entrepreneurship. More details at http://www.yonsei.ac.kr/eng/academics/iacf/foundation/ About the authors Hun-Joon Park is a Professor and Chair of Management in the School of Business at Yonsei University. He was Executive Director of the Social Venture Competition in Korea from 2007-2010. Dong-il Jung is a Professor of Management in the School of Business at Yonsei University. He was selected as one of the top 30 business thinkers in Korea by the largest Korean business daily newspaper (Maeil Business Newspaper) . Bernd Schmitt is the Robert D. Calkins Professor of International Business at Columbia Business School. He is also the faculty director of the Center on Global Brand Leadership. From 2011-2013, he was the Executive Director of the Institute on Asian Consumer Insight and Nanyang Visiting Professor at Nanyang Technological University where the institute is hosted. Center on Global Brand Leadership 2 Woori Financial Group: Becoming a World-Class Organization through OneDo The case describes the plans of Mr. Pal-Seung Lee, Chairman and CEO of Woori Finance Holdings, South Korea’s largest financial group, to turn his organization into one of Asia’s top 10 financial institutions. In response to the global financial crisis, Woori Finance Holdings had launched its OneDo program to transform the group into a low- cost, highly-efficient and innovative organization. What role could OneDo play now in Mr. Lee’s goal of becoming a leader in financial services industry in Asia? December 2012, Seoul, South Korea On a rainy day in December 2012, Pal-Seung Lee, Chairman of Woori Finance Holdings, sat down with case authors, at their request, to discuss the future of the holding company and the Woori brand. Chairman Lee had met with the case authors before, almost five years ago, when he was CEO of Seoul Philharmonic Orchestra. Accordingly, it seemed natural to begin the conversation by talking about orchestras and classical music—whether Japanese orchestras still dominated the classical music scene in Asia, or whether other orchestras had caught up; how Chinese orchestras were fast gaining ground; how the competition among Singapore Symphony Orchestra and Hong Kong Philharmonics played out; and, most importantly, where the Seoul Philharmonics ranked by now in Asia. Because they were all avid classical music fans, the conversation carried on for almost 30 minutes and was only briefly interrupted by some quick exchange about the state of the world economy. “Looks gloomy indeed” Mr. Lee remarked. Auspiciously, outside, rain turned into snow, and the room became darker and darker. As the conversation turned back to banking, and music, Mr. Lee suddenly drew an unexpected analogy, “You know, the banking landscape in Asia isn’t that different from orchestras and classical music.” Despite Korea’s economic progress over the last two decades, among the top ten financial institutions in Asia, none was Korean. The financial landscape was dominated by other Asian banks and financial organizations: four were Japanese, four Chinese and two from Australia. South Korea had developed several major global brands in a variety of businesses, including Samsung and LG in consumer electronics; Hyundai and Kia in the automotive industry; and Amore Pacific in cosmetics and skin care. The country was increasingly seen as innovative and “hip,” as it also successfully exported its cultural products (movies, pop music and popular culture). Yet, none of its banks was well known in the world or even in the rest of Asia. In finance in Asia, Woori, Korea’s top financial brand, ranked at a distant position 18. Center on Global Brand Leadership 3 Mr. Lee seemed disturbed by this fact and determined to change it. “Woori must become one of the top ten financial institutions in Asia over the next decade,” he told us. However, over the course of our conversation with him, he also touched on several issues that seem to be holding Woori back and that would need to be resolved to achieve this objective. For example, Woori was still owned 57 per cent by the Korean government. Some decisions were not made on commercial interests. Moreover, Woori had been slow and cautious in its expansion, having engaged in only 18 mergers and acquisitions in its entire history. How could Woori make progress? How could these issues be resolved? Despite these obstacles, Mr. Lee believed that it was possible to become a top 10 Asian financial organization soon. And it became clear to us that he seemed to believe so, because of Woori’s strong corporate culture exemplified best by its recent “OneDo” program. “OneDo” seemed to be a key element in Mr. Lee’s strategy. He returned back to the “OneDo” theme over and over again. OneDo for original cost cutting. OneDo for process reengineering. OneDo as part of a new business model. So, here is the story of how Mr. Lee, Chairman of Woori Finance Holdings, aims to turn his organization into the Asia top 10, and what role he feels OneDo plays in the transformation. Establishment of Woori Financial Group While Woori Financial Group was officially launched on April 2, 2001, t its true foundation can be traced back to the Korean financial crisis that started on November 21, 1997. In exchange for financial support, the South Korean government followed strict terms and conditions set by the International Monetary Fund. The government imposed austerity measures and intensive restructuring of the entire financial sector. At that time, nine financial institutions faced insolvency and their business operations were subsequently suspended. Commercial banks were required to fulfill the Bank of International Settlement’s Basel I Accord mandate of an eight-percent capital adequacy ratio in order to achieve normalization. As a result of such austerity measures, the government stepped in and took control of five troubled banks (Dongnam, Donghwa, Gyeonggi, Chungcheong and Daedong), eventually selling their assets and operations to several large domestic banks. The Commercial Bank of Korea and Hanil Bank eventually merged in January 1999 to form Hanvit Bank. By the end of 1999, the South Korean government aggressively pushed its first stage of restructuring: eliminating insolvency. This plan was orchestrated by merging relatively competitive financial institutions and allowing them Center on Global Brand Leadership 4 to absorb their weaker counter parties. However, this method of removing insolvency by way of mergers did not result in any substantial impact on the overall banking sector. The South Korean government had shifted its focus and attention on improving international competitiveness in its second stage of restructuring. At the time, the global trend was to establish a financial holdings company. So, with the assistance of the Korean Deposit Insurance Corporation, the government facilitated the merger of Hanvit Bank and several other banks to form South Korea’s first financial holdings company, Woori Finance Holdings Co., Ltd. In April 2001, at the time of launch, the holdings company had total equity share capital of 3.6 trillion KRW and total assets of 97.0 trillion KRW. South Korea’s first and largest financial group had been successfully launched. Growth of Woori Finance Holdings On September 29, 2003, Woori Finance Holdings Co. listed its IPO on the New York Stock Exchange taking the first step towards becoming a full-scale, global financial company. The organization had maintained steady revenue growth through extensive M&A. In 2012, the Group consisted of a financial holdings company and eleven subsidiaries with a combined asset value of 395 trillion KRW being the domestic market leader. Exhibit 1 presents a list of affiliates and subsidiaries of Woori Financial Group. The subsidiaries covered all the major financial industries—including commercial banking, investment banking, insurance, consumer credit, asset management, private equity, NPL investment and management, financial IT solutions, and a savings bank. Woori Bank served as partner of leading Korean companies such as Samsung, LG and POSCO, Woori Investment & Securities, the Group’s investment bank, was a leader in its own right with the best corporate network within the industry. With a global network of 14 subsidiaries, 15 branches and five representative offices in 16 countries, the Group had also embarked on globalization.